Australia’s ERA scores win in battle to keep uranium lease

Australia’s Federal Court has temporarily halted the government’s decision to not extend Rio Tinto-owned Energy Resources of Australia‘s (ASX: ERA) lease for a high-grade uranium deposit in the country’s Northern Territory.

ERA had applied in March for a 10-year lease renewal for Jabikula, which is on a parcel of land surrounded by Kakadu National Park. The asset is considered one of the world’s largest untapped deposits of high-grade uranium.

The Northern Territory government, however, declined to renew ERA’s Jabiluka lease, which prompted Boss Energy (ASX: BOE) to retract an offer to pay ERA A$550 million (US$360 million) for the site. The Australian government last month said it planned to incorporate the land into Kakadu National Park.

ERA shares soared on the announcement, a small win in the battle to keep the lease, as the ruling sets a status quo on the licence until further court orders. The stock closed up more than 14% to A1.6¢, leaving the uranium miner with a market capitalization of A$496.1 million (US$326 million).

“The matter has been listed for a case management hearing before the court on Aug. 19 to set a timetable for the hearing of ERA’s case,” ERA said in a statement.

Earlier this week, the uranium miner said it had begun a legal action against Australia’s resources minister and other officials, following the non-renewal of its lease for Jabikula.

The Mirarr, the traditional owners of lands in Australia’s north, have long opposed to mining activities in the region, organizing protests in the late 1990s and early 2000s. 

Rio Tinto (ASX: RIO), which owns roughly 80% of ERA but does not operate it, has backed their position in recent years as it works to repair its ties with Indigenous groups after destroying sacred rock shelters at Juukan Gorge in Western Australia in 2020 for an iron ore mine expansion.

Hustle and bustle

Activity in the Australian uranium market has spiked over the past year, with developers such as Boss Energy, Bannerman Energy (ASX: BMN) and Deep Yellow (ASX: DYL) seeing their value soar.

Paladin Energy (ASX: PDN), a Western Australia-based uranium miner, recently announced a proposed acquisition of Canadian developer Fission Uranium (TSX: FCU). If successful, the combined company would produce 10% of global uranium output.

In contrast, ERA’s value has steadily dropped since the Ranger uranium mine, located near Jabiluka, stopped producing in 2021, after 40 years of operations. 

Rehabilitation costs for the site have surged to A$2.2 billion (US$1.4 billion) over the past year and the company is expected to run out of funds by year-end. With no other significant assets, raising capital would be a very difficult task.

Australia is home to almost one-third of the world’s identified uranium reserves, yet the mining of this resource is permitted in only two of its eight states and territories — South Australia and the Northern Territory. 

The country’s only operating uranium mines are BHP’s Olympic Dam, which generates uranium as a secondary product of its copper mining activities and Boss Energy’s Honeywell mine. Together, they account for around 9% of the global reported production of uranium.